[alankang]

Hi Sir,

Thank you for your amazing explanation!

Now, I have cleared my minds on the theory behind.

Thanks for your information about this issue (the topic will not be asked in AFM exam). As this topic still inside the Study Text, hence, I am assuming that this will be asked in the exam.

Once again, thanks for your helping on this topic.

Regards,
Alan

[alankang]

Hi Sir,

As I am reading “The Theory of Comparative Advantage” and this illustration has been used.

I will re-post the whole question below. As per your mentioned, there is no selling cost stated in the question.
_______________________________________

Imagine a global economy with two countries and two products. Each country needs both products and at present all needs are met by domestic production. Each country has the same resources available to it and they are split equally between the two products.

Suppose the current situation with regard to production is as follows:
Units of X per day Units of Y per day
Country A 1,200 720
Country B 960 240
Total daily production 2,160 960

As the situation currently stands, country A has an absolute advantage in production of both X and Y.
Given this what are the benefits of A trading with B?

To answer this question we need to consider the opportunity costs incurred by producing X and Y.

• If country A were to focus on making X only, it would give up 720 units of Y to produce an extra 1,200 units of X, i.e. the opportunity cost of 1 unit of X is 720/1,200 = 0.6 units of Y.
• If country B were to focus on making X only, it would give up 240 units of Y to produce an extra 960 units of X, i.e. the opportunity cost of 1 unit of X is 240/960 = 0.25 units of Y.
• The opportunity cost of producing X is lower for country B than it is for country A. It follows that B has a comparative advantage in production of X and should specialise in this product.

If country B is to make product X, it follows that country A should make product Y. An analysis of opportunity costs supports this conclusion.

• If country A were to focus on making Y only, it would give up 1,200 units of X to make 720 units of Y, i.e. the opportunity cost of 1 unit of Y is 1,200/720 = 1.67 units of X.
• If country B were to focus on making Y only, it would give up 960 units of X to make 240 units of Y, i.e. the opportunity cost of 1 unit of Y is 960/240 = 4 units of X.
• Since country A has the lowest opportunity cost for production of Y, it should specialise in production of this product.

The impact of this decision by each country to specialise in production of the good for which they have the lowest opportunity cost on world output is shown below:

Specialisation based on lowest opportunity cost
Units of X per day Units of Y per day
Country A 0 1,440
Country B 1,920 0
Total daily production 1,920 1,440
_______________________________________

These is the whole question that I copy and paste from the Study Text.

Thank you.

Regards,
Alan

[alankang]

Hi Sir,

Thank you for your replying.

I am apologize for the inconvenient caused to you.

And also, I will look at the ISA 240 (redrafted) again.

Thank you.

Regards,
Alan

[alankang]

Thanks Sir.

I think I am able to get it.

[alankang]

Hi Sir,

Thanks for your clarify.

Regards,
Alan

[alankang]

Hi Sir,

I am reading the answer on IAS 41and it did mentioned that “movement increase in FV of $ 170,100”.

The question I want to ask is where can I get the figure of $1,480,000?

Thanks.
Alan

[alankang]

Dear Sir,

Thank you for your prompt response.

Will based on that link and go through the technical articles for SBR.

Thank you.

[alankang]

Dear John,

Thank you for your responses.

Regards,
Alan

[alankang]

Dear Ashwin,

Thanks for your explanation. Now, I think I get it clear where I went wrong.

Thank you.

[alankang]

Dear John,

Thank you for your prompt responses.

Can I assume that when we see this kind of Qs in the exam, for the valuation of bond, we need to add the interest which is $8 inside the redemption which is $102 in total $110? Whereas for Yield to Maturity, the redemption is just only $102.

Thank you.

[alankang]

Hi Sir,

For this example, when we calculate PV, it is PV = CF x AF 1-10 which is $ 1 mil x 7.722 = $ 7,722,000 instead of $ 7,721,735 that you showed in the example.

If the answer is $ 7,722,000, then the “liability retained” will affected the figure of right-to-use and gain on transferred to SPL along too?

Please correct me if I am wrong.

Thank you.

[Author]

Posts